Time Warner Cable Reports 2012 Fourth-Quarter and Full-Year Results

NEW YORK--(BUSINESS WIRE)--Time Warner Cable Inc. (NYSE: TWC) today reported financial results for
its fourth quarter and full year ended December 31, 2012.

Time Warner Cable Chief Executive Officer Glenn Britt said: “We
delivered revenue growth of almost 9% in 2012 – powered by our
acquisition and successful integration of Insight Communications,
continued success in residential high-speed data and business services,
and a best-ever year in advertising. In the year ahead, we plan to focus
on operational excellence as we invest to capture long-term
opportunities and drive profitable growth.”

FINANCIAL RESULTS

Revenue for the fourth quarter of 2012 increased 9.9% from the
fourth quarter of 2011 to $5.5 billion. Residential services revenue
increased 6.8% year-over-year to $4.6 billion, business services revenue
grew 25.9% to $515 million, advertising revenue increased 29.3% to $313
million and other revenue grew 37.9% to $80 million.

Advertising revenue includes revenue from political advertising of
$60 million and $5 million for the fourth quarter of 2012 and
2011, respectively, and$114 million and $15 million for the
full year of 2012 and 2011, respectively.

Revenue for the fourth quarter and full year of 2012 benefited
from acquisitions, as detailed below.

(in millions; unaudited)

4th Quarter 2012

Historical

Organic

Acquisitions

Total

TWC(a)

% Change(b)

Insight

NewWave(c)

Total

TWC

Residential services revenue:

Video

$

2,546

(3.1

%)

$

137

$

4

$

141

$

2,687

High-speed data

1,279

11.4

%

66

1

67

1,346

Voice

488

(1.4

%)

38

1

39

527

Other

16

23.1

%

1

—

1

17

Total residential services revenue

4,329

1.1

%

242

6

248

4,577

Business services revenue

498

21.8

%

17

—

17

515

Advertising revenue

299

23.6

%

14

—

14

313

Other revenue

77

32.8

%

2

1

3

80

Total revenue

$

5,203

4.2

%

$

275

$

7

$

282

$

5,485

(a)

Historical TWC amounts include the results of the cable systems
acquired from NewWave Communications (acquired on November 1,
2011) fromNovember 1 through December 31, 2012 and exclude
the results of (i) Insight Communications Company, Inc. and (ii)
the NewWave cable systems fromOctober 1 through October 31,
2012.

(b)

Organic % Change represents the change between the Historical TWC
amounts for the fourth quarter of 2012 and TWC’s results for the
fourth quarterof 2011 included in the table above.

(c)

NewWave amounts represent the NewWave cable systems’ results for the
period from October 1 through October 31, 2012.

(in millions; unaudited)

Full Year 2012

Historical

Organic

Acquisitions

Total

TWC(a)

% Change(b)

Insight(c)

NewWave(d)

NaviSite(e)

Total

TWC

Residential services revenue:

Video

$

10,418

(1.6

%)

$

462

$

37

$

—

$

499

$

10,917

High-speed data

4,856

8.5

%

220

14

—

234

5,090

Voice

1,968

(0.6

%)

127

9

—

136

2,104

Other

61

24.5

%

3

—

—

3

64

Total residential services revenue

17,303

1.2

%

812

60

—

872

18,175

Business services revenue

1,792

22.0

%

55

5

49

109

1,901

Advertising revenue

1,013

15.1

%

40

—

—

40

1,053

Other revenue

252

8.2

%

4

1

—

5

257

Total revenue

$

20,360

3.5

%

$

911

$

66

$

49

$

1,026

$

21,386

(a)

Historical TWC amounts include the results of (i) NaviSite, Inc.
(acquired on April 21, 2011) from April 21 through December 31,
2012 and (ii) theNewWave cable systems from November 1
through December 31, 2012 and exclude the results of (i) NaviSite
from January 1 through April 20, 2012,(ii) Insight and (iii)
the NewWave cable systems from January 1 through October 31, 2012.

(b)

Organic % Change represents the change between the Historical TWC
amounts for the year ended December 31, 2012 and TWC’s results for
the yearended December 31, 2011 included in the table on
page 2.

(c)

Insight amounts represent the financial results of Insight from the
date of acquisition (February 29, 2012) through December 31, 2012.

(d)

NewWave amounts represent the NewWave cable systems’ results for the
period from January 1 through October 31, 2012.

(e)

NaviSite amounts represent NaviSite’s results for the period from
January 1 through April 20, 2012.

Excluding the impact from acquisitions:

Residential services revenue

Residential services revenue growth for the fourth quarter and full year
of 2012 was primarily driven by an increase in high-speed data revenue,
partially offset by declines in video and voice revenue.

The growth in residential high-speed data revenue was the result of
growth in high-speed data subscribers and an increase in average
revenue per subscriber, primarily due to price increases (including
equipment rental charges) and a greater percentage of subscribers
purchasing higher-priced tiers of service.

Residential voice revenue decreased slightly due to a decrease in
average revenue per subscriber, partially offset by growth in voice
subscribers.

Business services revenue

Business services revenue growth for the fourth quarter and full year of
2012 was primarily due to increases in high-speed data and voice
subscribers and growth in Metro Ethernet revenue.

Advertising revenue

Advertising revenue increased for the fourth quarter and full year of
2012 primarily as a result of increases in political advertising,
revenue from advertising inventory sold on behalf of other video
distributors and the advertising sold on the Company’s two Los Angeles
regional sports networks, which were launched on October 1, 2012 and
carry Los Angeles Lakers’ basketball games and other sports programming.

Other revenue

Other revenue increased for the fourth quarter and full year of 2012
primarily as a result of fees from distributors of the Los Angeles
regional sports networks.

Fourth-quarter 2012 Adjusted Operating Income before Depreciation and
Amortization (“Adjusted OIBDA”) increased 5.6% from the fourth
quarter of 2011 to $2.0 billion driven by revenue growth, partially
offset by a 12.5% increase in operating expenses. In particular,
employee costs were up 11.4% to $1.2 billion, video programming expenses
grew 7.0% to $1.2 billion, marketing costs increased 18.3% to $181
million, voice costs were up 10.6% to $156 million and other operating
costs increased 27.0% to $649 million.

Full-year 2012 Adjusted OIBDA increased 8.3% from 2011 to $7.8 billion.
The year-over-year increase in Adjusted OIBDA was driven by revenue
growth, partially offset by an 8.9% increase in operating expenses. For
the full year, employee costs were up 10.7% to $4.5 billion, video
programming expenses grew 6.4% to $4.6 billion, voice costs were up 3.2%
to $614 million and other operating costs increased 15.6% to $2.3
billion.

In both the fourth-quarter and full-year 2012:

Employee costs were up primarily due to higher headcount (primarily
driven by acquisitions and organic growth in business services,
partially offset by an organic decline in residential services) and
higher compensation costs per employee. Pension costs increased $15
million and $60 million for the fourth quarter and full year of 2012,
respectively, primarily due to the decline in interest rates to
historically low levels.

Video programming expenses grew due to an increase in average monthly
video programming costs per video subscriber and a net increase in
video subscribers (primarily due to the acquisition of Insight offset,
in part, by an organic decline in video subscribers). Average monthly
video programming costs per video subscriber increased 5.1%
year-over-year to $31.28 for the fourth quarter of 2012 and 5.2%
year-over-year to $31.12 for the full year of 2012, primarily driven
by contractual rate increases and the carriage of new networks,
partially offset by a decline in transactional video-on-demand costs.
For the fourth quarter and full year of 2012, video programming costs
were reduced by approximately $20 million and $40 million,
respectively, and, for the full year of 2011, video programming costs
were reduced by approximately $25 million due to changes in cost
estimates for programming services carried during contract
negotiations, changes in programming audit reserves and certain
contract settlements.

Voice costs were up primarily as a result of an increase in voice
subscribers due to both organic growth and the Insight acquisition,
partially offset by a decrease in delivery costs per subscriber
related to the in-sourcing of voice transport, switching and
interconnection services.

Other operating costs increased as a result of costs associated with
Insight and the Los Angeles regional sports networks, as well as
increases in a number of categories.

Fourth-quarter 2012 Operating Income increased 13.6% from the
fourth quarter of 2011 to $1.2 billion and full-year 2012 Operating
Incomeincreased 9.2% from 2011 to $4.4 billion, both driven by
higher Adjusted OIBDA and the fourth-quarter 2011 wireless-related asset
impairments, partially offset by higher depreciation and amortization
expenses primarily as a result of the Company’s recent acquisitions
(largely Insight). The increase in depreciation expense was partially
offset by certain assets acquired in the 2006 transactions with Adelphia
Communications Corporation and Comcast Corporation that were fully
depreciated as of July 31, 2012. Operating Income growth was also
impacted by merger-related and restructuring costs, which, on a
year-over-year basis, decreased $17 million for the fourth quarter of
2012 and increased $45 million for the full year of 2012.

(in millions; unaudited)

4th Quarter

Full Year

Change

Change

2012

2011

$

%

2012

2011

$

%

Adjusted OIBDA(a)

$

1,994

$

1,889

$

105

5.6

%

$

7,824

$

7,226

$

598

8.3

%

Adjusted OIBDA margin(b)

36.4

%

37.8

%

36.6

%

36.7

%

Merger-related and restructuring costs

(17

)

(34

)

17

(50.0

%)

(115

)

(70

)

(45

)

64.3

%

Asset impairments(c)

—

(60

)

60

(100.0

%)

—

(60

)

60

(100.0

%)

OIBDA(a)

1,977

1,795

182

10.1

%

7,709

7,096

613

8.6

%

Depreciation

(777

)

(756

)

(21

)

2.8

%

(3,154

)

(2,994

)

(160

)

5.3

%

Amortization

(31

)

(10

)

(21

)

210.0

%

(110

)

(33

)

(77

)

233.3

%

Operating Income

$

1,169

$

1,029

$

140

13.6

%

$

4,445

$

4,069

$

376

9.2

%

(a)

Refer to Note 2 to the accompanying consolidated financial
statements for a definition of OIBDA and Adjusted OIBDA.

(b)

Adjusted OIBDA margin is defined as Adjusted OIBDA as a percentage
of total revenue.

(c)

Refer to Note 1 to the accompanying consolidated financial
statements for additional information.

Adjusted OIBDA less Capital Expenditures for the full year of
2012 totaled $4.7 billion, a 10.3% increase over the full year of 2011,
primarily due to higher Adjusted OIBDA, partially offset by higher
capital expenditures. Capital Expenditures, which include
Insight-related capital spending of approximately $100 million,were
$3.1 billion in 2012.

(in millions; unaudited)

4th Quarter

Full Year

Change

Change

2012

2011

$

%

2012

2011

$

%

Adjusted OIBDA(a)

$

1,994

$

1,889

$

105

5.6

%

$

7,824

$

7,226

$

598

8.3

%

Capital expenditures

(904

)

(942

)

38

(4.0

%)

(3,095

)

(2,937

)

(158

)

5.4

%

Adjusted OIBDA less capital expenditures(a)

$

1,090

$

947

$

143

15.1

%

$

4,729

$

4,289

$

440

10.3

%

(a)

Refer to Note 2 to the accompanying consolidated financial
statements for a definition of Adjusted OIBDA and Adjusted OIBDA
less capital expenditures.

Fourth-quarter 2012 Net Income Attributable to TWC Shareholders
was $513 million, or $1.70 per basic common share and $1.68 per diluted
common share, compared to $564 million, or $1.76 per basic common share
and $1.75 per diluted common share, in the prior year quarter. Full-year
2012 net income attributable to TWC shareholders was $2.2 billion, or
$6.97 per basic common share and $6.90 per diluted common share,
compared to $1.7 billion, or $5.02 per basic common share and $4.97 per
diluted common share, in the prior year.

Fourth-quarter Adjusted Net Income Attributable to TWC Shareholders
and Adjusted Diluted EPS, which exclude certain tax matters, a
2011 asset impairment and other items affecting the comparability of
TWC’s results for 2012 and 2011 (detailed in Note 1 to the accompanying
consolidated financial statements), were $479 million and $1.57,
respectively, for the fourth quarter of 2012 compared to $447 million
and $1.38, respectively, for the fourth quarter of 2011. These increases
were primarily due to higher Operating Income, partially offset by
higher income tax provision.

Full-year Adjusted net income attributable to TWC shareholders and
Adjusted Diluted EPS, which exclude the 2012 investment-related gains
(SpectrumCo, LLC and Clearwire Corporation), certain tax matters and
other items detailed in Note 1, were $1.8 billion and $5.75,
respectively, for 2012 compared to $1.6 billion and $4.69, respectively,
for 2011. These increases were primarily due to higher Operating Income
and a change in other income (expense), net, partially offset by higher
income tax provision and interest expense, net. The change in other
income (expense), net, was primarily due to a decline in losses from
Clearwire Communications LLC as the Company’s investment was reduced to
$0 during the third quarter of 2011.

Additionally, Adjusted Diluted EPS for the fourth quarter and full year
of 2012 benefited from lower average common shares outstanding as a
result of share repurchases under the Company’s stock repurchase program.

(in millions, except per share data; unaudited)

4th Quarter

Full Year

Change

Change

2012

2011

$

%

2012

2011

$

%

Net income attributable to TWC

shareholders

$

513

$

564

$

(51

)

(9.0

%)

$

2,155

$

1,665

$

490

29.4

%

Adjusted net income attributable to TWC

shareholders(a)

$

479

$

447

$

32

7.2

%

$

1,797

$

1,573

$

224

14.2

%

Net income per common share attributable

to TWC common shareholders:

Basic

$

1.70

$

1.76

$

(0.06

)

(3.4

%)

$

6.97

$

5.02

$

1.95

38.8

%

Diluted

$

1.68

$

1.75

$

(0.07

)

(4.0

%)

$

6.90

$

4.97

$

1.93

38.8

%

Adjusted Diluted EPS(a)

$

1.57

$

1.38

$

0.19

13.8

%

$

5.75

$

4.69

$

1.06

22.6

%

(a)

Refer to Note 2 to the accompanying consolidated financial
statements for a definition of Adjusted net income attributable to
TWC shareholders andAdjusted Diluted EPS.

Free Cash Flow for the full-year 2012 decreased 7.1%, or $194
million, to $2.6 billion due mainly to lower cash provided by operating
activities and an increase in capital expenditures. Cash Provided by
Operating Activities for the full-year 2012 was $5.5 billion, a 2.9%
decrease from $5.7 billion in 2011. This decrease was driven by an
increase in income tax payments, a significant income tax refund
(received in the first quarter of 2011) and higher net interest
payments, partially offset by higher Adjusted OIBDA and lower pension
plan contributions.

(in millions; unaudited)

4th Quarter

Full Year

Change

Change

2012

2011

$

%

2012

2011

$

%

Adjusted OIBDA(a)

$

1,994

$

1,889

$

105

5.6

%

$

7,824

$

7,226

$

598

8.3

%

Net interest payments

(300

)

(306

)

6

(2.0

%)

(1,602

)

(1,434

)

(168

)

11.7

%

Net income tax refunds (payments)

(253

)

(5

)

(248

)

NM

(544

)

162

(706

)

(435.8

%)

Pension plan contributions

(137

)

(326

)

189

(58.0

%)

(289

)

(405

)

116

(28.6

%)

All other, net, including working capital

changes

106

92

14

15.2

%

136

139

(3

)

(2.2

%)

Cash provided by operating activities

1,410

1,344

66

4.9

%

5,525

5,688

(163

)

(2.9

%)

Add:

Income taxes paid on investment sales

84

—

84

NM

84

—

84

NM

Excess tax benefit from exercise of

stock options

8

2

6

300.0

%

81

48

33

68.8

%

Less:

Capital expenditures

(904

)

(942

)

38

(4.0

%)

(3,095

)

(2,937

)

(158

)

5.4

%

Cash paid for other intangible assets

(10

)

(11

)

1

(9.1

%)

(37

)

(47

)

10

(21.3

%)

Other

(1

)

(2

)

1

(50.0

%)

(6

)

(6

)

—

—

Free Cash Flow(a)

587

391

196

50.1

%

2,552

2,746

(194

)

(7.1

%)

Economic Stimulus Act impacts(b)

26

(83

)

109

(131.3

%)

102

(619

)

721

(116.5

%)

Free Cash Flow excluding Economic

Stimulus Act impacts

$

613

$

308

$

305

99.0

%

$

2,654

$

2,127

$

527

24.8

%

NM—Not meaningful.

(a)

Refer to Note 2 to the accompanying consolidated financial
statements for a definition of Adjusted OIBDA and Free Cash Flow.

(b)

Additional information on the Economic Stimulus Acts is available
in the Trending Schedules posted on the Company’s website atwww.twc.com/investors.

Net Debt and Mandatorily Redeemable Preferred Equity totaled
$23.5 billion as of December 31, 2012 compared to $21.6 billion as of
December 31, 2011, as the cash used for the acquisition of Insight,
share repurchases and dividend payments was greater than Free Cash Flow
and the proceeds from the sale of SpectrumCo’s advanced wireless
spectrum licenses.

(in millions; unaudited)

12/31/2012

12/31/2011

Long-term debt

$

25,171

$

24,320

Debt due within one year

1,518

2,122

Total debt

26,689

26,442

Cash and equivalents

(3,304)

(5,177)

Short-term investments in U.S. Treasury securities

(150)

—

Net debt(a)

23,235

21,265

Mandatorily redeemable preferred equity

300

300

Net debt and mandatorily redeemable preferred equity

$

23,535

$

21,565

(a)

Net debt is defined as total debt less cash and equivalents and
short-term investments in U.S. Treasury securities.

RETURN OF CAPITAL

Time Warner Cable returned $742 million and $2.6 billion to shareholders
during the fourth quarter and full year of 2012, respectively. Share
repurchases totaled $571 million, or 6.0 million shares of common stock,
during the fourth quarter of 2012 and totaled $1.9 billion, or 22.1
million shares of common stock, during the full year of 2012. As of
December 31, 2012, $2.2 billion remained under the Company’s share
repurchase authorization. Time Warner Cable also paid regular dividends
of $171 million and $700 million during the fourth quarter and full year
of 2012, respectively.

SUBSCRIBER METRICS

(in thousands)

9/30/2012

NetAdditions

(Declines)

12/31/2012

Residential services subscribers:

Video

12,159

(129)

12,030

High-speed data

10,860

75

10,935

Voice

4,990

34

5,024

Business services subscribers:

Video

185

3

188

High-speed data

446

14

460

Voice

212

12

224

Single play subscribers

5,936

(29)

5,907

Double play subscribers

5,070

(34)

5,036

Triple play subscribers

4,258

36

4,294

Customer relationships

15,264

(27)

15,237

For definitions related to the Company’s subscriber metrics, refer to
the Trending Schedules posted on the Company’s website at www.twc.com/investors.

Non-GAAP Financial Measures

The Company refers to certain financial measures that are not presented
in accordance with U.S. generally accepted accounting principles
(“GAAP”), including OIBDA, Adjusted OIBDA, Adjusted OIBDA less capital
expenditures, Adjusted net income attributable to TWC shareholders,
Adjusted Diluted EPS and Free Cash Flow. Refer to Note 2 to the
accompanying consolidated financial statements for a discussion of the
Company’s use of non-GAAP financial measures.

About Time Warner Cable

Time Warner Cable Inc. (NYSE: TWC) is among the largest providers of
video, high-speed data and voice services in the United States,
connecting more than 15 million customers to entertainment, information
and each other. Time Warner Cable Business Class offers data, video and
voice services to businesses of all sizes, cell tower backhaul services
to wireless carriers and managed and outsourced information technology
solutions and cloud services. Time Warner Cable Media, the advertising
arm of Time Warner Cable, offers national, regional and local companies
innovative advertising solutions. More information about the services of
Time Warner Cable is available at www.twc.com,
www.twcbc.com
and www.twcmedia.com.

Additional details on financial and subscriber metrics are included in
the Trending Schedules and Presentation Slides posted on the Company’s
Investor Relations website at www.twc.com/investors.

Information on Conference Call

Time Warner Cable’s earnings conference call can be heard live at
8:30 am ET on Thursday, January 31, 2013. To listen to the call, visit www.twc.com/investors.

Caution Concerning Forward-Looking Statements

This document includes certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
statements are based on management’s current expectations or beliefs,
and are subject to uncertainty and changes in circumstances. Actual
results may vary materially from those expressed or implied by the
statements herein due to changes in economic, business, competitive,
technological, strategic and/or regulatory factors, and other factors
affecting the operations of Time Warner Cable Inc. More detailed
information about these factors may be found in filings by Time Warner
Cable Inc. with the Securities and Exchange Commission, including its
most recent Annual Report on Form 10-K and Quarterly Reports on Form
10-Q. Time Warner Cable is under no obligation to, and expressly
disclaims any such obligation to, update or alter its forward-looking
statements, whether as a result of new information, future events, or
otherwise.

TIME WARNER CABLE INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)

December 31,

2012

2011

(in millions)

ASSETS

Current assets:

Cash and equivalents

$

3,304

$

5,177

Short-term investments in U.S. Treasury securities

150

—

Receivables, less allowances of $65 million and $62 million

as of December 31, 2012 and 2011, respectively

883

767

Deferred income tax assets

317

267

Other current assets

223

187

Total current assets

4,877

6,398

Investments

87

774

Property, plant and equipment, net

14,742

13,905

Intangible assets subject to amortization, net

641

228

Intangible assets not subject to amortization

26,011

24,272

Goodwill

2,889

2,247

Other assets

562

452

Total assets

$

49,809

$

48,276

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

653

$

545

Deferred revenue and subscriber-related liabilities

183

169

Accrued programming expense

872

807

Current maturities of long-term debt

1,518

2,122

Mandatorily redeemable preferred equity issued by a subsidiary

300

—

Other current liabilities

1,799

1,727

Total current liabilities

5,325

5,370

Long-term debt

25,171

24,320

Mandatorily redeemable preferred equity issued by a subsidiary

—

300

Deferred income tax liabilities, net

11,280

10,198

Other liabilities

750

551

TWC shareholders’ equity:

Common stock, $0.01 par value, 297.7 million and 315.0 million
shares issued and

outstanding as of December 31, 2012 and 2011, respectively

3

3

Additional paid-in capital

7,576

8,018

Retained earnings

363

68

Accumulated other comprehensive loss, net

(663

)

(559

)

Total TWC shareholders’ equity

7,279

7,530

Noncontrolling interests

4

7

Total equity

7,283

7,537

Total liabilities and equity

$

49,809

$

48,276

See accompanying notes.

TIME WARNER CABLE INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2012

2011

2012

2011

(in millions, except per share data)

Revenue

$

5,485

$

4,993

$

21,386

$

19,675

Costs and expenses:

Cost of revenue(a)

2,565

2,283

9,942

9,138

Selling, general and administrative(a)

926

821

3,620

3,311

Depreciation

777

756

3,154

2,994

Amortization

31

10

110

33

Merger-related and restructuring costs

17

34

115

70

Asset impairments

—

60

—

60

Total costs and expenses

4,316

3,964

16,941

15,606

Operating Income

1,169

1,029

4,445

4,069

Interest expense, net

(402

)

(406

)

(1,606

)

(1,518

)

Other income (expense), net

4

(5

)

497

(89

)

Income before income taxes

771

618

3,336

2,462

Income tax provision

(257

)

(54

)

(1,177

)

(795

)

Net income

514

564

2,159

1,667

Less: Net income attributable to noncontrolling interests

(1

)

—

(4

)

(2

)

Net income attributable to TWC shareholders

$

513

$

564

$

2,155

$

1,665

Net income per common share attributable to

TWC common shareholders:

Basic

$

1.70

$

1.76

$

6.97

$

5.02

Diluted

$

1.68

$

1.75

$

6.90

$

4.97

Average common shares outstanding:

Basic

300.7

317.8

307.8

329.7

Diluted

305.6

323.1

312.4

335.3

Cash dividends declared per share

$

0.56

$

0.48

$

2.24

$

1.92

——————————

(a) Cost of revenue and selling, general and
administrative expenses exclude depreciation.

The following items affected the comparability of Time Warner Cable
Inc.’s (“TWC” or the “Company”) results for the three months and year
ended December 31, 2012 and 2011:

(in millions, except per share data)

OIBDA(a)

D&A(a)

OperatingIncome

Other(a)

Income TaxProvision

TWC Net

Income(a)

Diluted

EPS(a)

4th Quarter 2012:

As reported

$

1,977

$

(808)

$

1,169

$

(399)

$

(257)

$

513

$

1.68

Year-over-year change, as reported:

$

$

182

$

(42)

$

140

$

12

$

(203)

$

(51)

$

(0.07)

%

10.1%

5.5%

13.6%

(2.9%)

375.9%

(9.0%)

(4.0%)

Items affecting comparability:

Merger-related and restructuring costs

17

—

17

—

(6)

11

0.03

Loss on equity award reimbursement obligation to Time Warner(b)

—

—

—

4

(2)

2

0.01

Impact of certain state tax matters(c)

—

—

—

—

(47)

(47)

(0.15)

As adjusted

$

1,994

$

(808)

$

1,186

$

(395)

$

(312)

$

479

$

1.57

Year-over-year change, as adjusted:

$

$

105

$

(42)

$

63

$

8

$

(39)

$

32

$

0.19

%

5.6%

5.5%

5.6%

(2.0%)

14.3%

7.2%

13.8%

4th Quarter 2011:

As reported

$

1,795

$

(766)

$

1,029

$

(411)

$

(54)

$

564

$

1.75

Items affecting comparability:

Merger-related and restructuring costs

34

—

34

—

(14)

20

0.06

Asset impairments(d)

60

—

60

—

(24)

36

0.11

Loss on equity award reimbursement obligation to Time Warner(b)

—

—

—

8

(3)

5

0.01

Change in net deferred income tax liability

effective tax rate(e)

—

—

—

—

(178)

(178)

(0.55)

As adjusted

$

1,889

$

(766)

$

1,123

$

(403)

$

(273)

$

447

$

1.38

——————————

(a)

OIBDA represents Operating Income before Depreciation and
Amortization. D&A represents depreciation and amortization. Other
consists of interestexpense, net, other income (expense),
net, and net income attributable to noncontrolling interests. TWC
net income represents net incomeattributable to TWC
shareholders. Diluted EPS represents net income per diluted common
share attributable to TWC common shareholders.

(b)

Pursuant to an agreement with Time Warner Inc. (“Time Warner”),
TWC is obligated to reimburse Time Warner for the cost of certain
Time Warnerequity awards held by TWC employees upon exercise
of such awards. Amounts represent the change in the reimbursement
obligation, whichfluctuates primarily with the fair value
and expected volatility of Time Warner common stock, and changes
in fair value are recorded in other income(expense), net, in
the period of change.

(c)

Amount primarily represents a benefit recorded as a result of a
California state tax law change.

(d)

In early 2012, TWC ceased making its existing wireless service
available to new wireless customers. As a result, during the
fourth quarter of 2011, theCompany impaired $60 million of
assets related to the provision of wireless service that would no
longer be utilized.

(e)

During the fourth quarter of 2011, TWC completed its income tax
returns for the 2010 taxable year, its first full-year income tax
returns subsequentto TWC’s separation from Time Warner on
March 12, 2009 (the “Separation”), reflecting the income tax
positions and state income taxapportionments of TWC as a
standalone taxpayer. Based on these returns, the Company concluded
that an approximate 65 basis point change in theestimate of
the effective tax rate applied to calculate its net deferred
income tax liability was required. As a result, TWC recorded a
noncash incometax benefit of $178 million.

(in millions, except per share data)

OIBDA(a)

D&A(a)

OperatingIncome

Other(a)

Income TaxProvision

TWC NetIncome(a)

Diluted

EPS(a)

Full Year 2012:

As reported

$

7,709

$

(3,264

)

$

4,445

$

(1,113

)

$

(1,177

)

$

2,155

$

6.90

Year-over-year change, as reported:

$

$

613

$

(237

)

$

376

$

496

$

(382

)

$

490

$

1.93

%

8.6

%

7.8

%

9.2

%

(30.8

%)

48.1

%

29.4

%

38.8

%

Items affecting comparability:

Merger-related and restructuring costs

115

—

115

—

(46

)

69

0.22

Asset impairments(b)

—

—

—

12

(5

)

7

0.02

Gain on SpectrumCo’s sale of spectrum licenses(c)

—

—

—

(430

)

169

(261

)

(0.84

)

Gain on sale of investment in Clearwire(d)

—

—

—

(64

)

(19

)

(83

)

(0.27

)

Loss on equity award reimbursement obligation to Time Warner(e)

—

—

—

9

(4

)

5

0.02

Change in net deferred income tax liability effective tax rate(f)

—

—

—

—

(63

)

(63

)

(0.20

)

Impact of certain state tax matters(g)

—

—

—

—

(47

)

(47

)

(0.15

)

Impact of partnership basis difference(h)

—

—

—

—

15

15

0.05

As adjusted

$

7,824

$

(3,264

)

$

4,560

$

(1,586

)

$

(1,177

)

$

1,797

$

5.75

Year-over-year change, as adjusted:

$

$

598

$

(237

)

$

361

$

18

$

(155

)

$

224

$

1.06

%

8.3

%

7.8

%

8.6

%

(1.1

%)

15.2

%

14.2

%

22.6

%

Full Year 2011:

As reported

$

7,096

$

(3,027

)

$

4,069

$

(1,609

)

$

(795

)

$

1,665

$

4.97

Items affecting comparability:

Merger-related and restructuring costs

70

—

70

—

(28

)

42

0.12

Asset impairments(i)

60

—

60

—

(24

)

36

0.11

Loss on equity award reimbursement obligation to Time Warner(e)

—

—

—

5

(2

)

3

0.01

Change in net deferred income tax liability effective tax rate(j)

—

—

—

—

(178

)

(178

)

(0.53

)

Impact of domestic production activities deduction

—

—

—

—

(9

)

(9

)

(0.03

)

Impact of expired Time Warner stock options, net(k)

—

—

—

—

14

14

0.04

As adjusted

$

7,226

$

(3,027

)

$

4,199

$

(1,604

)

$

(1,022

)

$

1,573

$

4.69

(a)

OIBDA represents Operating Income before Depreciation and
Amortization. D&A represents depreciation and amortization. Other
consists of interestexpense, net, other income (expense),
net, and net income attributable to noncontrolling interests. TWC
net income represents net incomeattributable to TWC
shareholders. Diluted EPS represents net income per diluted common
share attributable to TWC common shareholders.

On August 24, 2012, SpectrumCo, LLC (“SpectrumCo”) of which TWC
owns 31.2%, sold all of its advanced wireless spectrum licenses to
CellcoPartnership (doing business as Verizon Wireless).

(d)

On September 27, 2012, the Company sold all of its investment in
Clearwire Corporation (“Clearwire”). Income tax provision amount
includes a $46million benefit related to the reversal of a
valuation allowance against a deferred income tax asset associated
with the Company’s investment inClearwire.

(e)

Pursuant to an agreement with Time Warner, TWC is obligated to
reimburse Time Warner for the cost of certain Time Warner equity
awards held byTWC employees upon exercise of such awards.
Amounts represent the change in the reimbursement obligation,
which fluctuates primarily with thefair value and expected
volatility of Time Warner common stock, and changes in fair value
are recorded in other income (expense), net, in the periodof
change.

(f)

Amount represents a benefit related to a change in the tax rate
applied to calculate the Company’s net deferred income tax
liability as a result of aninternal reorganization effective
on September 30, 2012.

(g)

Amount primarily represents a benefit recorded as a result of a
California state tax law change.

(h)

Amount represents a charge related to the recording of a deferred
income tax liability associated with a partnership basis difference.

(i)

In early 2012, TWC ceased making its existing wireless service
available to new wireless customers. As a result, during the
fourth quarter of 2011, theCompany impaired $60 million of
assets related to the provision of wireless service that would no
longer be utilized.

(j)

During the fourth quarter of 2011, TWC completed its income tax
returns for the 2010 taxable year, its first full-year income tax
returns subsequentto the Separation, reflecting the income
tax positions and state income tax apportionments of TWC as a
standalone taxpayer. Based on thesereturns, the Company
concluded that an approximate 65 basis point change in the
estimate of the effective tax rate applied to calculate its netdeferred
income tax liability was required. As a result, TWC recorded a
noncash income tax benefit of $178 million.

(k)

Amount represents the impact of the reversal of deferred income
tax assets associated with Time Warner stock option awards held by
TWCemployees, net of excess tax benefits realized upon the
exercise of TWC stock options or vesting of TWC restricted stock
units.

2.USE OF NON-GAAP FINANCIAL MEASURES

In discussing its performance, the Company may use certain measures that
are not calculated and presented in accordance with U.S. generally
accepted accounting principles (“GAAP”). These measures include OIBDA,
Adjusted OIBDA, Adjusted OIBDA less capital expenditures, Adjusted net
income attributable to TWC shareholders, Adjusted Diluted EPS and Free
Cash Flow, which the Company defines as follows:

OIBDA (Operating Income before Depreciation and Amortization)means Operating Income before depreciation of tangible assets and
amortization of intangible assets.

Adjusted OIBDA means OIBDA excluding the impact, if any, of
noncash impairments of goodwill, intangible and fixed assets; gains
and losses on asset sales; merger-related and restructuring costs; and
costs associated with certain equity awards granted to employees to
offset value lost as a result of the Separation.

Adjusted net income attributable to TWC shareholders means net
income attributable to TWC shareholders (as defined under GAAP)
excluding the impact, if any, of noncash impairments of goodwill,
intangible and fixed assets and investments; gains and losses on asset
sales; merger-related and restructuring costs; changes in the
Company’s equity award reimbursement obligation to Time Warner;
certain changes to income tax provision; and costs associated with
certain equity awards granted to employees to offset value lost as a
result of the Separation; as well as the impact of taxes and
noncontrolling interests on the above items. Similarly, Adjusted
Diluted EPS means net income per diluted common share attributable
to TWC common shareholders excluding the above items.

Free Cash Flow means cash provided by operating activities (as
defined under GAAP) excluding the impact, if any, of cash provided or
used by discontinued operations, plus (i) any income taxes paid on
investment sales and (ii) any excess tax benefit from equity-based
compensation, less (i) capital expenditures, (ii) cash paid for other
intangible assets (excluding those associated with business
combinations), (iii) partnership distributions to third parties and
(iv) principal payments on capital leases.

Management uses OIBDA and Adjusted OIBDA, among other measures, in
evaluating the performance of the Company’s business because they
eliminate the effects of (i) considerable amounts of noncash
depreciation and amortization and (ii) items not within the control of
the Company’s operations managers (such as net income attributable to
noncontrolling interests, income tax provision, other income (expense),
net, and interest expense, net). Adjusted OIBDA further eliminates the
effects of certain noncash items identified in the definition of
Adjusted OIBDA above. Adjusted OIBDA less capital expenditures also
allows management to evaluate performance including the effect of
capital spending decisions. Adjusted OIBDA and Adjusted OIBDA less
capital expenditures are also significant performance measures used in
the Company’s annual incentive compensation programs. Adjusted net
income attributable to TWC shareholders and Adjusted Diluted EPS are
considered important indicators of the operational strength of the
Company as these measures eliminate amounts that do not reflect the
fundamental performance of the Company. The Company utilizes Adjusted
Diluted EPS, among other measures, to evaluate its performance both on
an absolute basis and relative to its peers and the broader market.
Management believes that Free Cash Flow is an important indicator of the
Company’s ability to generate cash, reduce net debt, pay dividends,
repurchase common stock and make strategic investments, after the
payment of cash taxes, interest and other cash items. In addition, all
of these measures are commonly used by analysts, investors and others in
evaluating the Company’s performance and liquidity.

These measures have inherent limitations. For example, OIBDA and
Adjusted OIBDA do not reflect capital expenditures or the periodic costs
of certain capitalized assets used in generating revenue. To compensate
for such limitations, management evaluates performance through Adjusted
OIBDA less capital expenditures and Free Cash Flow, which reflect
capital expenditure decisions, and net income attributable to TWC
shareholders, which reflects the periodic costs of capitalized assets.
Adjusted OIBDA and Adjusted OIBDA less capital expenditures do not
reflect any of the items noted as exclusions in the definition of
Adjusted OIBDA above. To compensate for these limitations, management
evaluates performance through OIBDA and net income attributable to TWC
shareholders, which do reflect such items. OIBDA, Adjusted OIBDA and
Adjusted OIBDA less capital expenditures also fail to reflect the
significant costs borne by the Company for income taxes and debt
servicing costs, the share of OIBDA, Adjusted OIBDA and Adjusted OIBDA
less capital expenditures attributable to noncontrolling interests, the
results of the Company’s equity investments and other non-operational
income or expense. Additionally, Adjusted net income attributable to TWC
shareholders and Adjusted Diluted EPS do not reflect certain charges
that affect the operating results of the Company and they involve
judgment as to whether items affect fundamental operating performance.
Management compensates for these limitations by using other analytics
such as a review of net income attributable to TWC shareholders. Free
Cash Flow, a liquidity measure, does not reflect payments made in
connection with investments and acquisitions, which reduce liquidity. To
compensate for this limitation, management evaluates such investments
and acquisitions through other measures such as return on investment
analyses.

These non-GAAP measures should be considered in addition to, not as
substitutes for, the Company’s Operating Income, net income attributable
to TWC shareholders and various cash flow measures (e.g., cash provided
by operating activities), as well as other measures of financial
performance and liquidity reported in accordance with GAAP, and may not
be comparable to similarly titled measures used by other companies.